Will the Housing Market CRASH in 2023?
Will the housing market crash in 2023? The housing market question is on top of everyones mind and this video addresses the question on whether we can expect a housing market crash in 2023.
As the Federal Reserve continues to raise rates, the housing market is under increasing pressure. The National Association of Realtors reported that Pending Home Sales, based on signed contracts fell by 4% in November compared to October.
Pending Home Sales declined in all parts of the country with the North east being the most impacted. On a year over year basis however, the West is the most impacted, whilst the Midwest has been the most stable.
And while Pending Home Sales data and existing home sales data continue to decline, the NAR home affordability index isn't showing a rosy picture. While income is still rising, it isn't at the same pace as rising rates and therefore, monthly payments as a percentage of income is increasing thus making housing more unaffordable.
So what are people doing. Well according to NPR, buyers and sellers are both holding off on home sales and purchases.
And since inventory of homes continues to be low, there isn't a substantial drop in the median prices of homes. For that matter, according to the St Louis fed, the median price is rising albeit at a slowing pace.
This bodes favorably for home sellers since there isnt a big drop in home prices, the challenge though is they are having to keep their homes on the market for longer.
Home builders are also seeing this data. They are also batting down the hatches for a potential upcoming recession. Therefore, the number of home construction permits has declined which is not helping the supply shortage.
So what can you expect? Well it largely depends on which seat you are in.
If you are a homeowner, you can expect an increase in the number of flyers in your mailbox from thirsty real estate agents who are seeing a decline in their income as houses sit on the market for longer.
If you are thinking about selling your home, the economic downturn hasnt hit, so its not a bad time to do so. Should the economy experience some real pain, with significant job losses, demand will disappear and there will be price drops. But we don't know if this will actually occur, even though it seems likely.
After all, The fed needs job losses and lack of wage growth to curb inflation. But we aren't there yet.
If you are a home seller who has a sense of urgency, its beneficial to ensure your house is competitive in the market whether its a matter of updating the property or being competitive on price. Else the property may sit on the market for longer, though it will likely still sell.
If you are in the market for a home, its perhaps the toughest spot. Home affordability is less than desirable. And should there be a recession with job losses, it can be even more difficult. So i would expect the data to continue to show pending home sales and existing home sales continuing to fall as buyers sit on the side lines in the upcoming months.
Whats unlikely to occur though, is a major drop in home prices in the short term, or 2008 style foreclosures as some youtubers may suggest.
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DISCLAIMER: The opinions expressed in these videos are not meant to be financial advice. Always consult with your financial advisor and do your own due diligence as individual facts and circumstances may vary.
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